Fenway common stock - fair price
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Fenway Corporation common stock has a beta of 1.5. A security analyst forecasts an expected return of 15% over the next year. The market risk premium is 8% and the risk free rate is 4%. In a CAPM framework, does the analyst believe that Fenway common stock is fairly priced?
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Solution Summary
This solution answers a question about fair stock prices, addressing CAPM and ERR.
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According to the CAPM model
Expected return= Risk free rate + Beta*(Market ...
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